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Restructuring of Mid-Career Training for Indian Administrative Officers Public Policy in a Transitional Society: Successes and Challenges – The Case of China
YILIN HOU
April 26, 2007

Outline:

Outline Introduction: Public Policy
China – a Survey: Background
Economic Development 1978-2006: Towards a Comfortable Society
Social Development: Towards a Comfortable and Harmonious Society
Major (Generic) Lessons and Conclusion

Introduction:

Introduction 1. Public Policy Defined
Origin of Word: politia – administration; almost exclusively implies “position”, “stand” and hence “action by government”
Policy – Economic and Social
government is necessarily involved in public affairs
in most occasions we refer to economic policy and social policy

Introduction:

Introduction 2. Market Economy and Government
Classical economics (Adam Smith, 1776): “laissez-faire” – let the invisible hand of the market make all decisions
“Government is to do what individuals or even groups of individuals cannot do or cannot do well (or as well)” – Abraham Lincoln

Role of Related Policies:

Role of Related Policies Related policies are required to turn economic policy into reality
Monetary policy: to control inflation
Budgetary policy: to maintain operation
Social policies: to provide a favorable environment for economic operation

Transitional / Developing Society:

Transitional / Developing Society Some Common Features:
Economically underdeveloped
Slow / late in industrialization / modernization
Relatively poor in capital and technology
Social …
Political …

Public Policy in a Transitional / Developing Society:

Public Policy in a Transitional / Developing Society Government involvement is necessary
in economic development
(to mobilize resources) for competition on international market
sound public policy crucial for better utilization of limited resources

Public Policy Evaluation :

Public Policy Evaluation Evaluation of Success / Failure of Policies (Campagna 1987):
Is the policy justified?
Is the policy successful?
Is the policy rational?

Justification of a Policy:

Justification of a Policy Intellectual perspective: position and action taken or forsaken should be judged in accord to prevailing economic orthodoxy
Alternative approaches – for comparison
Public attitudes towards social and economic problems
Loss of individual freedom when control is transferred to public authorities

Judgment of Success:

Judgment of Success Success / failure: in relation to what?
Total or partial: room for partial achievements of goals or partial fulfillment of objectives
both advocates and critics to claim victory
Political compromises: partial results are routine
No experimentation is allowed
Any interpretation of past policies must rely on some value judgment

The logic of reforms:

The logic of reforms A Framework for Examining Policy Design and Implementation
The Economic logic
The Social logic
The Political logic
The Administrative / Technical logic

The Economic logic of reforms:

The Economic logic of reforms
Will the policy promote development by providing incentives or removing barriers?
Will the policy promote efficiency by increasing productivity or reducing waste?

The Social logic of reforms:

The Social logic of reforms
Will the policy promote equity, social justice, and public satisfaction by reducing inequity or removing injustice? Thus,
Will the policy provide a more favorable environment for the reforms?

The Political logic of reforms:

The Political logic of reforms
Will the policy promote cohesion by providing unity or reducing division among the major social groups and political actors?
Will it improve democratic governance?

Administrative/Technical logic:

Administrative/Technical logic
Is the policy practical and operable? Such that
It is acceptable by
all levels of government ?
public employees /civil servants ? and
The general public ?

Scope / Coverage:

Scope / Coverage Some major socio-economic related policies in China
Use China as a case to examine policies
Purpose is to draw lessons for other transitional societies, India in particular

China-India Comparability :

China-India Comparability Population size close; both large in area
Close in culture; China learned a lot from India in history
Both with glorious ancient times, and rich cultural heritage
Developing, rapidly in recent decades
Facing similar challenges, difficulties, and opportunities

China 1840-1976: Frustrations:

China 1840-1976: Frustrations The most populous country, with very low per-capita farmland ratio
Underdeveloped, poor, agricultural for a long time
Numerous foreign invasions since 1840
almost always a loser on battlefield / the sea
forced to cede territory on many occasions
No real industrial revolution before the 1950s

Failures in Reform Attempts:

Failures in Reform Attempts Continuous civil wars 1911 to 1949
Never had a democratic state/political system of western style
Political system and leadership style with strong feudal characteristics
Central government exerted control with uniform rules and centralized systems; almost always complete failure

Dream of Prosperity:

Dream of Prosperity Common to Chinese leaders since 1911
Communist Party of China (since 1949): determined to realize the dream at any cost
CPC had to start everything from scratch
to industrialize, starting with heavy industries
keep low consumption to save for investment capital
central planning of national economy
centralized management of enterprises
tight control of citizen mobility: urban-rural split

Approach to Reform 1978-:

Approach to Reform 1978- Strict Control and Leadership by Ruling
Party (Communist Party of China)
Party appoint all officials
CPC has changed substantively since 1976: especially in 1978, 1992, and 2007
Not the topic of this lecture

Approach to Reform 1978-:

Approach to Reform 1978- Economic Development as Priority, High Growth Rate as Target
Rationale: Quick growth will be solution or lubricant to other problems
Evaluation of officials’ performance by economic growth rate of their jurisdiction
Economic (social affairs) decentralization under political centralization
Economic reform ahead of political reform
Socio-economic changes prior to political / structural changes

Approach to Reform 1978-:

Approach to Reform 1978- Gradualism / Incrementalism
New measures start with pilots, experiments before full implementation
Dual tracks/structures co-exist in early stages of new policy implementation: the New to expand and the old to shrink
Allow some individuals/regions to get rich ahead of the rest
Economic Reforms first in agricultural sector
Limited political reforms first tried in rural areas

Where is China Going? :

Where is China Going?:

Where is China Going? Stage Two – Social Development
Since mid-1990s, deep down, structural
Establish social security systems
Environmental protection: since 2002-04
Production / Worksite safety

Where is China Going?:

Where is China Going? Stage Two – Social Development
From free provision to market price
Housing (urban)
Higher education
Public health

Where is China Going?:

Where is China Going? Stage three – Political Development
Since 2004
Equity: inter-regional, urban-rural, rich-poor
Private property protection since 2004-07
Democratic governance and rule of law

ECONOMIC DEVELOPMENT:

ECONOMIC DEVELOPMENT “Towards a Prosperous Society”
GREAT ACHIEVEMENTS (with huge hidden costs)
Aggregate Economy
Urbanization and Employment: Quick Transition from Rural to Urban Society
Industrialization and High Technology
Survival: Who Can Feed China?

SOCIAL DEVELOPMENT :

SOCIAL DEVELOPMENT “Towards a Comfortable Society”
PARTIAL SUCCESS
Population control
PARTIAL FAILURE
Basic education;
State-owned enterprise reform
TOTAL FAILURE
Public health reform

Population Control:

Population Control Effectively reduced natural growth rate of population
Relieved too heavy a burden on economy and environment
Rapid passage into old-age society
One child policy not effective in rural areas

Basic Education – “Natural” Outcome:

Basic Education – “Natural” Outcome Education Law: 4% of GDP for education and free
ineffective: Local officials aim quick returns for all investment; basic education is not on list
Fees / charges of all kinds became only venues for resources
school principals had no other choice
local governments acquiesced

Basic Education – “Natural” Outcome:

Basic Education – “Natural” Outcome Parents in urban areas accepted fees bitterly
every child is the only one in the family;
then complain to media → social pressure
In rural areas, shabbiest building is school. “Compulsory education” is empty words:
parents do not send children to school – too expensive;
child laborers can earn money for family

Basic Education – Analysis :

Basic Education – Analysis Basic education is public good.
Government should allocate adequately each year;
for rural areas and under-developed regions Central Government should make adequate transfers
Very unfair to rural residents
Adversely affected at least two generations of rural population
Problem is absence of government support
absence of right policy is poor/bad policy
Beginning 2007, total change

State-Owned Enterprises Reform:

State-Owned Enterprises Reform Political system reform lag behind
Personnel system reform lag behind
Social security reform lag behind
Legal protection of private property became official only in March 2007
this slowness retarded private sector, hence barrier to job creation

State-Owned Enterprises Reform:

State-Owned Enterprises Reform Problem for a long time
Once started in mid- and late-1990s
Explicit unemployment
Implicit unemployment
Glorious cities in the past shabby towns now
Ownership conversion generated corruption
Will take a generation to go through

Public Health Reform – WHY?:

Public Health Reform – WHY? Old centrally planned/controlled system not work any more
Free, full coverage for all state employees;
no coverage for dependents and non-employees
loopholes for huge waste
financial burden on government too heavy;
Health professional underpaid
lack of incentives; inefficiency
under-provision
Rural residents under very limited, rudimentary coverage by cooperatives; even that went broke after communes were abolished in early 1980s
Service quality low, in urban and especially rural areas

Public Health Reform – targets:

Public Health Reform – targets Reduce government financial burden
Establish a market system of health services, so that
Market mechanism will provide adequate services to meet demand; and
Supply-demand equilibrium will also improve service quality

Public Health Reform – measures:

Public Health Reform – measures (started early-90s, intensified mid-90s) Semi-Market:
Both employer / employee contribute towards a health fund as insurance
Minor expenses out of pocket;
major expenses above certain line out of the fund.
Health insurance market said to be existing but not function well: general public not ready to purchase health insurance policies; thus,
Non-state employees, children, rural population still left uncovered

Public Health Reform – measures:

Public Health Reform – measures Funding
Government funding capped: growth slow
Health institutions to self-sustain with limited government funding
Hospitals allowed to set own fees/charges
Drug prices set free
Hospitals run pharmacies

Public Health Reform – outcome:

Public Health Reform – outcome Provision increased dramatically
Prices sky-rocketed, under various tags/excuses
Service quality can be higher, at high prices
“No payment, no service” led to numerous instances of tragedies
Media full of tragic stories
social complaints rampant
became political pressure on social stability

Public Health Reform – outcome:

Public Health Reform – outcome Central Government publicly admitted the reform was a complete failure (2006);
new framework is being formulated

Public Health Reform – analysis:

Public Health Reform – analysis Inadequate government input – basic public health security is a public good
Lack of government intervention and regulation in process of market formation
Highly visible inequity between officials and employees, rich and poor, urban and rural

MAJOR LESSONS – conclusion :

MAJOR LESSONS – conclusion Has China made great achievements in public policy design and implementation?
Has China made mistakes in its economic, social, and political development?
Has China offered many success- and failure-stories for other developing countries?
Yes
Many

MAJOR LESSONS – conclusion:

MAJOR LESSONS – conclusion Is there a policy that can be copied from China?
No.
Has there been a policy that is complete success or failure?
No, all judgments are value laden.

MAJOR LESSONS – conclusion:

MAJOR LESSONS – conclusion
Is there a best reform route?
No; there are only sub-optimal routes, and sub-sub-optimal alternatives.
Every policy is a choice in a maze of pros and cons.